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Poverty Costs – an Economic Case for a Preventative Poverty Reduction Strategy in Alberta

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Poverty Costs – an Economic Case for a Preventative Poverty Reduction Strategy in Alberta Poverty Costs AN ECONOMIC CaSE FOR A PREVENTATIVE POVERTY REDUCTION STRATEGY IN ALBERTA Co-Authors: Alexa Briggs and Celia R. Lee Acknowledgements Advisory Committee: Joe Ceci (Chair), Brenna Atnikov, Derek Cook, Joanne Currie, Kelly Ernst, Bill Moore-Kilgannon, John Kolkman, Mike Fotheringham, Dan Meades, Elsbeth Mehrer, Lori Sigurdson and Sharlyn White - who reviewed several drafts of this report and provided valuable insights and expertise. External Reviewers: John Stapleton and Greg Flanagan - who read several drafts and provided valuable feedback and methodological expertise. Other Readers: several of whom provided comments on various drafts of the report. Communications and Creative Design: Jeff Howard Project Assistant: Linda McFarlane. Cover Photo Credit: Ming Emma Ko Copyright © 2012 by Vibrant Communities Calgary & Action to End Poverty in Alberta Library and Archives Canada Cataloguing in Publication Poverty costs [electronic resource] : an economic case for a preventative poverty reduction strategy in Alberta / Alexa Briggs & Celia R. Lee. Co-published by: Vibrant Communties Calgary & Action to End Poverty in Alberta. Includes bibliographical references. Electronic monograph in PDF format. Issued also in print format. ISBN 978-0-9879387-1-8 (VCC) -- ISBN 978-0-9879388-1-7 (AEPA) 1. Poverty--Alberta. 2. Poor--Alberta. 3. Alberta--Social conditions--21st century. 4. Alberta--Economic condi- tions--21st century. I. Briggs, Alexa & Lee, Celia R. II. Vibrant Communities Calgary III. Action to End Poverty in Alberta IV. Title. HC117.A2B75 2012 339.4’6097123 C2012-900783-8 This report should be cited as: Briggs, A. & Lee, C.R. (2012). Poverty Costs, An Economic Case for a Preventative Poverty Reduction Strategy in Alberta. Calgary: Vibrant Communities Calgary and Action to End Poverty in Alberta. Our Funders: TABLE OF CONTENTS EXECUTIVE SUMMARY ����������������������������������������������������������������������� 1 INTRODUCTION ��������������������������������������������������������������������������������� 3 POVERTY IN ALBERTA AND CANADA ����������������������������������������������������� 4 MEASURING POVERTY ����������������������������������������������������������������������� 4 POVERTY BY THE NUMBERS ����������������������������������������������������������������� 6 POVERTY IN CONTEXT ���������������������������������������������������������������������� 9 TACKLING POVERTY ������������������������������������������������������������������������ 12 POVERTY AS A SYSTEMIC ISSUE ���������������������������������������������������������� 12 POVERTY REDUCTION ��������������������������������������������������������������������� 13 WHO IS RESPONSIBLE FOR POVERTY REDUCTION IN ALBERTA? ��������������������� 16 EXTERNAL COSTS OF POVERTY ��������������������������������������������������������� 19 STRENGTHS AND LIMITATIONS ����������������������������������������������������������� 21 COSTS OF POVERTY TO HEALTH CARE ������������������������������������������������� 22 CALCULATING THE COSTS ��������������������������������������������������������������� 22 COSTS OF POVERTY ATTRIBUTABLE TO CRIME ��������������������������������������� 26 CALCULATING THE COSTS ��������������������������������������������������������������� 28 INTERGENERATIONAL COSTS OF POVERTY ��������������������������������������������� 29 CALCULATING THE COSTS ��������������������������������������������������������������� 29 OPPORTUNITY COSTS OF POVERTY ����������������������������������������������������� 31 CALCULATING THE COSTS ��������������������������������������������������������������� 32 TOTAL EXTERNAL COSTS OF POVERTY ������������������������������������������������� 34 INVESTING IN A POVERTY REDUCTION STRATEGY ��������������������������������� 35 REFERENCES ���������������������������������������������������������������������������������� 37 FOREWORD The opening line of the Alberta Poverty Costs report is staggering. It says, “Poverty is experienced in 148,000 families in Alberta and by 73,000 children, 34,000 of whom are below the age of 6.” It de- scribes how “Deteriorating health and mental health, decreasing trust among citizens, and increased spending on health and justice systems are all measurable outcomes of poverty and growing inequal- ity.” The research in this report is solid and reveals truths that Albertans ignore at their peril. In a prov- ince that is so wealthy, homeless shelters, food banks and support systems for our most disadvantaged citizens are big business. This report details graphically the current situation and asks piercing ques- tions such as, “Are we succumbing to the myth that poverty is about individual choices rather than the systems we create in our societies?” and the question being asked by many other provinces and those who work at the national level, “How much does it cost to perpetuate poverty in Alberta?” The section on poverty by numbers should disturb all of us in this province. Looking at child poverty or the Gini Co-efficient, it is clear that the spread between rich and poor is ever wid- ening. Poverty is complex and this report seeks to eliminate the stereotypical attitudes and responses that we so often hear. Who lives in poverty and why? The Human Rights code was drawn up thoughtfully. It includes people currently living in poverty. We do not have the right to ignore anyone. Proven strategies are available that will reduce the costs of poverty by investing in prevention solutions. To me, as Chair of the National Council of Welfare (NCW), the most important message of the Alberta report is its focus on solutions. Exploring concepts such as a guaranteed form of income for all can lead us forward. This was done several decades ago for Seniors through the Old Age Secu- rity plan. Enabling all marginal sectors of society will improve their wellbeing and society at large. Poverty will not be solved overnight but the solutions are within our grasp. We must act on what we know. Sharing our understanding of the solutions will lead to effective results for all Albertans. The Alberta report is a major addition to the growing body of work of other provinces, other or- ganizations, including the NCW’s recent report, The Dollars and Sense of Solving Poverty, and the authors of many books and articles that address poverty and income inequality. They are the tools we can use to build an Alberta where no one lives in poverty and exclusion. This report de- tails the potential for a healthier Alberta where citizens live with dignity, happiness and wellbeing. John Rook, PhD Chair The National Council of Welfare EXECUTIVE SUMMARY As of 2009, poverty is experienced in 148,000 non-elderly families in Alberta and by 73,000 children, 34,000 of whom are below the age of 6. Even more Albertans are financially vulnerable: Alberta has a higher debt-to-income ratio than the Canadian average, 143% compared with 127% nationally, and is experiencing increasing income disparity, which is associated with growing poverty and growing social costs. Deteriorating health and mental health, decreasing trust among citizens, and increased spending on health and justice sys- tems are all measurable outcomes of poverty and greater inequality. Indicators show that despite efforts from hard-working individuals in the government and non-profit organizations, the poverty rate in Alberta has not significantly changed in the last five years; in fact, the average gap ratio is increasing, which suggests that low-income Alber- tans continue to fall further behind. Even though Canada performs well on the world stage economically and socially, we know that Canada does not have the lowest poverty rate in the world; sadly, we rank 17/24 on child poverty among developed nations. We know that there is more each province can do to reduce poverty. Some argue that reducing the number of people living in poverty is a moral imperative, and that we should therefore accelerate our efforts to address it. Others argue that our assistance programs are more poverty costs than generous already. Maintaining the status quo is certainly an op- Alberta tion – we could choose to declare that the programs and policies we have in place now are the most we are willing to do. If this is the case, it begs the question: What is the financial cost of this decision to our $7.1 - $9.5 provincial government, to taxpayers, and to those living in poverty? How much does it cost to perpetuate poverty in Alberta? BILLION every year. Our calculations show the following: $1.2 billion in health care costs $560 million in costs attributable to crime $473 million – $591 million in intergenerational costs $4.8 billion – $7.2 billion in opportunity costs $7.1 billion – $9.5 billion in Total Yearly External Costs of Poverty in Alberta Poverty Costs 1 Certainly not all of the costs of poverty can or should be captured in a dollar figure; however, in the interests of both taxpayers and recipients of social assistance, it is imperative that tax dollars are put to the most effective use possible. As with other provincial studies of this kind, our purpose is not to provide a definitive price tag on the cost of poverty, but to provide eco- nomic evidence of the scale of the costs associated with poverty in public services like health care, crime, and in lost economic opportunities for children and people living in poverty. Our approach is based on methodology that has been used provincially in Ontario, New Brunswick, Nova Scotia, Prince Edward Island, and British Columbia. These provinces found
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